Contributed By Formosan Brothers (Taipei)
Amid the trend towards outsourcing business in the Asian countries, Taiwan has put in a great performance in the outsourcing market. In terms of its extraordinary developments in the IT industry, Taiwan has carried out many of the IT outsourcing businesses. Taiwan has attracted well-known high-tech enterprises undertaking outsourcing businesses from the countries of Europe and America, such as cloud computing, data security, data analysis, IT system integration and management, facilities and equipment maintenance and rental, security operations centres (SOC), etc.
The key market developments in BP outsourcing are highly related to the businesses of manufacturing, banking and financing, securities, credit cards, e-commerce, lodging and dining, typically including both back-office outsourcing in relation to internal business functions, such as human resources (eg recruiting, training, consulting, and salary and welfare management), finance and accounting, procurement and system analysis, and front office outsourcing, such as customer-related services (eg contact centre services and customer support), internet banking, ATMs and voice trading systems.
The development of new technology without a doubt leads to great impacts on the market. However, new technology will not replace the demand for human service, especially for work and processes that involve a high level of training and professional skill, the capability of multi-tasking and communication.
Despite the fact that the application of new technology is gradually increasing, and that the government has encouraged industrial innovation and financial technology development, the government of Taiwan has not yet enacted a sufficiently comprehensive legal scheme along with concrete supporting measures in response to the emerging development of new technology.
There are other key market trends in Taiwan, including (i) knowledge process outsourcing (KPO) involving legal and regulatory compliance services, intellectual property, professional personnel training and high-level management human resources; (ii) logistics outsourcing, such as 4th party logistics (4PL) providers, which provide supply chain management, and 5th party logistics (5PL) providers, which design, organise and implement logistics solutions and technologies and particularly focus on e-commerce solutions; and (iii) software outsourcing.
Generally, there are no particular legal or regulatory restrictions on outsourcing in Taiwan except for specific businesses (see 2.2 Industry-specific Restrictions). However, there is the Labour Standards Act, which provides fundamental protections to workers in the employment relationship. Some important issues include the rules relating to mandatory rest days, work overtime, shifts and annual leave.
The Banking Act, Credit Cooperatives Act and Regulations Governing Internal Operating Systems and Procedures for the Outsourcing of Financial Institution Operation, and Insurance Act, Regulations Governing Implementation of Internal Control and Auditing System of Insurance Enterprises and Directions for Operation Outsourcing by Insurance Enterprises have been enacted to govern the operational outsourcing of financial institutions (including domestic banks and their overseas branches, domestic branches of foreign banks, credit co-operatives, bills finance companies and institutions operating credit card businesses) and insurance enterprises.
Directions for Business Entity Accounting Outsourcing by Securities Investment Consulting Enterprises has been promulgated by the Securities Investment Trust & Consulting Association of the R.O.C. (SITCA) to govern accounting outsourcing by securities investment consulting enterprises.
The Personal Information Protection Act and Enforcement Rules of Personal Information Protection Act have been enacted to govern the collection, processing and use of personal information so as to prevent harm to personality rights, and to facilitate the proper use of personal information. Under the Personal Information Protection Act, if one of the following occurs when a non-government agency transmits personal information internationally, the government authority in charge of the industry in question may limit its action:
Violation of such laws may result in criminal liability, administrative penalties and/or fines of certain amounts of New Taiwan Dollars.
Provisions relating to confidentiality are generally included in contracts to protect data and security, such as ownership of data, non-disclosure without authorisation, reasonable due care used to prevent unauthorised disclosure and return of data and its copies, etc. In addition, damages and injunctive relief provisions will be included as remedies for breach of confidentiality.
Under the Personal Information Protection Act, the following rights should be exercised by a party regarding his or her personal information and should not be waived in advance or limited by a specific agreement:
So-called “personal information” refers to: name, date of birth, ID Card number, passport number, characteristics, fingerprints, marital status, family, education, occupation, medical record, medical treatment, genetic information, sexual life, health examination, criminal record, contact information, financial condition, social activities and other information which may be used to identify a natural person, both directly and indirectly.
Mandate, contracting and subcontracting are standard supplier–customer models for outsourcing.
Joint venture is one of the very common contract models in Taiwan.
The concept of captives and shared services is an emerging concept in Taiwan. Sharing Economy Association, Taiwan was established in July 2018, which aims to develop shared economy in medical care, transportation, financial services, Internet of Things (IoT), etc.
Taiwan has the Civil Code, the Consumer Protection Act and the Financial Consumer Protection Act for customer protection. Generally, under the Civil Code, a party to a contract may claim for damages if the other party breaches the contract. Under the Consumer Protection Act, if there is any standard term or condition in violation of the good faith requirements and which is therefore unconscionable to consumers, the standard term or condition shall be rendered null and void.
In the event of a dispute between the financial consumer and financial services supplier, the consumer may file a complaint with the Financial Ombudsman Institution as designated by the competent authority after the financial consumer has complained to the financial services supplier without satisfactory outcome.
In addition, in terms of disputes between consumer and supplier in general, the consumer may file a complaint with the supplier, consumer advocacy groups or consumer service centres. If the above-mentioned complaint is not properly responded to, a further complaint with the consumer ombudsmen as designated by the competent authority may be made and further be mediated by the consumer dispute mediation commission as designated by the competent authority.
Under the Civil Code, when a party is in default, the other party may fix a reasonable period and notify the defaulting party to make correction within said period, failing which the other party may rescind (terminate) the contract. However, prior notice of termination is not required if, according to the nature of the contract or the expression of intent of the parties, the purpose of the contract cannot be accomplished if the obligations of the contract are not performed within said period, and if one of the parties does not perform the contract within that period.
Generally speaking, unless otherwise expressly provided under the laws, the parties to a contract may set forth contractual terms and conditions for the causes of termination or termination without cause based on the doctrine of freedom of contract.
(i) “Direct damage” means the existing property interests reduced due to the occurrence of damage, which is a positive damage (ie property reduction), such as damage to items, or increased need for life, eg nursing care and medical expenses.
(ii) "Indirect damage" means the acquisition of new property or the interests that should have been obtained without the occurrence of damage. Indirect loss is considered a negative damage (ie property not increasing), such as loss of profit, loss of goodwill and economic loss. As for loss of goodwill, the indemnified party can request a considerable amount for its loss of goodwill according to the Civil Code if the damage to the reputation or goodwill stands. In addition, the plaintiff may claim for the loss of business under the theory of tort. It is referred to as “pure economic loss”. However, pure economic loss applies based on the condition that the injury is done “intentionally” in a manner against the “rules of morals”. For example, the plaintiff can claim for the loss of business resulting from defendant’s intentional impairing of the plaintiff’s electric cable in a manner against the rules of morals.
Generally speaking, unless otherwise expressly provided under the laws, the parties to a contract may set forth contractual terms and conditions to exclude liability for indirect damage based on freedom of contract.
Generally, there are no specific or extraordinary implied terms in outsourcing contracts. Nevertheless, if any terms and conditions of a standard contract between consumer and supplier are unconscionable to the consumer, such terms and conditions are null and void. Moreover, where the terms and conditions of a standard contract are vague, they shall be construed in favour of the consumer.
The Labour Standards Act is the main law providing the protections of fundamental rights during the employee transfers. In outsourcing, the legal relation exists between the employee and the original employer. Hence the original employer owes the employee the duty to maintain his or her fundamental rights in the employment relationship.
In addition to the Labour Standards Act, the laws and regulations governing employee transfers for outsourcing in Taiwan include the Employment Service Act and Guidelines for Labour Dispatch. The Ministry of Labour also has promulgated a ruling regarding the required contractual terms for labour dispatch contracts.
If the collective agreement specifies that trade union or works' council consultation is necessary, the employer must hold a consultation with the trade union or works' council before outsourcing. If the collective agreement does not specify this, the trade union or works' council may require a consultation, and the employer must join the consultation under the principle of good faith.
Employee transfers or labour dispatches increasingly happen in the industries of banking and financing, securities, high technology, manufacturing, etc. It should be noted that non-competition for an employee being transferred is highly regulated. The court will refuse to enforce a non-competition agreement if certain statutory requirements, such as reasonable compensation or reasonable period of restriction, are not met.
Asset transfer is primarily regulated by the Civil Code, the Company Act and the Merger and Acquisition Act, which require a board resolution or shareholders’ resolution with respect to the transfer of the whole or any essential part of a company’s business or assets.